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2020 (9) TMI 967 - AT - Income TaxDisallowance of interest of labour expenditure - Disallowance based on mathematical calculations/formula based on earlier years’ data - expenditure on packing material is proportionately higher this year - HELD THAT:- Disallowance was made on the ground that the assessee could not establish the requirement of expenditure and that this was inflated expenditure to reduce profits. We are of the view that these disclosures are based on presumptions and assumptions. The assessee explained before the ld. authorities the reasons for the increase in the expenditure. Disallowance was not based on evidence. It is not the case of the AO that such expenditure was not incurred or was bogus expenditure. This is a surmise. The fact of the assessee incurring this expenditure is not challenged by the AO. Hence, we are unable to sustain the addition in question. So, we delete the same. Addition on account of finance cost - Capital work in progress is a fraction of interest free funds held by the company. The propositions of law laid down in the case of Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] is that, in such circumstances interest free funds will be presumed to have been utilized for investing in non-income yielding assets. Applying this proposition of law to the facts of this case we hold that disallowance in question of interest is bad in law. In the result, this ground of the assessee is allowed.
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